Olay: Brand Profile

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With a global audience in 80 countries by 2012, beauty and skincare brand Olay
is one of Procter & Gamble's biggest properties, and the global best-seller in facial
skincare. Sales broke through the $2bn barrier in
2008, and were estimated at around $3.3bn for 2013. The range now extends to more than 100 different moisturizing and cleansing products. It's a very long way from the
brand's original development as a treatment for wartime burn victims, and this growth has been achieved despite fierce competition
in the segment from rivals Dove, Neutrogena and Nivea,
each of which has rolled out a similar host of brand extensions. In an attempt to shrug off its competitors, P&G pushed Olay aggressively into the upper end of the market with a series of premium-priced anti-aging and regenerating products.

P&G has established Olay as arguably the world's best-known beauty and skincare brand, with a global reputation. Researcher Brand Finance ranked Olay as the world's most valuable beauty brand in 2012, with an estimated value of $11.8bn, almost $4bn higher than its nearest
rival. However it was ranked somewhat lower by the more widely accepted Brandz ranking from WPP's Kantar Group, which positioned it in 10th place among personal care brands with a value of $3.4bn. Both researchers use widely different criteria in their measurements. For its own part, P&G
describes Olay as the top-selling global facial skincare brand with 10% market share. Euromonitor & Sanford Bernstein estimated retail sales of $3.3bn for 2013.

Olay
has many competitors. While its principal
competitors (such as Dove or Neutrogena) have diversified into more generalised personal care products such as shampoos and
deodorants, Olay has remained firmly focused on the skincare sector, and since the 2000s has pushed aggressively into the premium
sector with a range of much higher-priced "masstige" variants. However, the brand's greatest strength - its success in the anti-aging
segment - threatens to become an area of significant weakness. Now established as the leading mass-market product for a generation of
women now in the 30-50 age range, Olay must now defend itself against newer or younger brands, perceived by
the next generation of consumers as more relevant. The popularisation of mass-market anti-aging products has led to a raft of competitive products, especially in the US, and Olay's growth has to some extent stalled since 2010. One way around this could be the roll-out of a wider range of Olay men's
grooming products. The first such products were tested in China in 2010 and introduced in other markets during 2011.

P&G has achieved spectacular success with Olay since it inherited the brand as a comparatively minor part of its
acquisition of Richardson-Vicks in 1985. It was then a rather old-fashioned beauty lotion, known derogatively within the industry
as Oil of Old Lady. Since the 1990s, though, P&G has reinvented and rejuvenated the brand, making it the umbrella for an
extensive range of beauty and skincare products. The company doesn't break out individual
sales of Olay, but claimed an overall 10% share of the global facial skin care market in 2010, which suggests retail sales of as
much as $6bn. It's a measure of Olay's importance to Procter & Gamble that it has regularly been their biggest brand by
marketing spend since the late 1990s, until overtaken by Cover Girl in 2012. Measured media expenditure in the US in 2012, according to Kantar/Advertising Age figures,
was $253m, down sharply from the year before. The brand maintains a small stable of celebrity ambassadors including actresses Thandie Newton and Kim
Cattrall, and singer Carrie Underwood. Katie Holmes joined the stable in 2014. Arabic actress Nour is the face of Olay in the Middle East, while Shilpa Shetty and
Karisma Kapoor are its representatives in India.

The Olay brand now encompasses a wide variety of moisturizing and cleansing products for the face and body, and comes in a
bewildering range of lotions, creams, bars, sprays and wipes. In the US, its biggest market by far, there are 11 different product lines. These include three different collections of anti-aging products, Regenerist, Age Defying and Total Effects, each with slightly different uses
and ingredients. A fourth line, Definity, introduced in 2006, had been the brand's highest-priced variant, selling for around $28 in the US. However it was superseded by other even more expensive variants, and was was merged into Total Effects in 2011. Olay Professional ProX, which launched in 2008,
is now the top-of-the-range line with prices upwards of $40. It promises a "professional anti-aging regime". Regenerist is the next most expensive at between $20 and $30. Olay Fresh Effects was introduced in 2013 for a younger market. Complete is the entry-level range
of moisturisers also containing vitamins and UV filters; Facial cleansing is the umbrella for several face-specific cleansers including Daily Facials wipes. Then there are three lines of body care products under the banners of Body Cleansing, Body Lotion hydrating creams, and Body Collections.

Adbrands Weekly Update 15th Aug 2013: Slipping sales at Procter & Gamble's mammoth beauty division prompted fashion trade bible WWD to relegate the group to third place in its annual Beauty 100 ranking, slipping behind the revitalised Unilever. WWD estimated total beauty revenues of $20.08bn for P&G in calendar
2012, compared to $20.7 for Unilever. L'Oreal remains firmly at the top of the table with $28.9bn. Rounding out the top five were Estee Lauder and Shiseido, some way behind at $10bn and $8.4bn respectively.

Adbrands Weekly Update 8th Aug 2013: Procter & Gamble's newly reinstated CEO AG Lafley reported annual figures for the year to June 2013, and the results were perhaps a little better than some had expected, despite a poor final quarter in which net
earnings almost halved. For the full year, however, earnings were up 5% to $11.3bn, better than last year but still well below past results. Revenues edged up by just 1%, but still hit an all-time high of $84.2bn. The weakest performances were from the group's giant beauty and grooming businesses, both which reported a decline in full-year revenues. Lafley
acknowledged problems at the Pantene and Olay brands, which have been outpaced in recent months by competitors. He admitted that P&G's beauty business had "stalled", but reassured investors, "We know what we need to do and we're on it." Gillette too, core of the men's grooming division,
faces multiple challenges, including less frequent facial shaving and a rise in popularity in body shaving, a segment where the group remains weak. Those declines were offset by modest increases at other group divisions, notably health care. Lafley said he has spent the two months since he was reappointed as CEO on a
"deep dive" into P&G's business, "trying hard to see things as they are, not as we want them to be." The group is, he explained, pushing forward urgently to increase productivity and efficiency. "We've got to get to a much more agile, a much faster, a much more decisive culture."
However he warned that the process wouldn't take effect overnight. "We're threading a needle here... It's going to take a couple of years before we've got everything in place so that we're hitting on enough cylinders to perform to our full potential."

Among other recent additions to the collection is a range of Facial Hair Removal products. In China and other Asia Pacific markets, there are also several face whitening creams and lotions,
catering to local ideas of beauty. In an even more unconventional move, P&G licensed the brand to Pharmavite in 2003 to
develop a range of Olay Vitamins, in a range of "Beauty Nutrients" and
"Wellness Nutrients". The group experimented unsuccessfully with an Olay cosmetics line between 1999 and 2001. In
2006, it introduced a small range of cosmetic products under its Cover Girl brand which also contain Olay technology, and in 2010
it launched a co-branded line of Dawn dishwashing detergents which promise to provide better care for hands. The Olay brand has also been co-opted for several other group products, including a Venus with Olay razor for ladies. In the US, the
best-selling line is Regenerist, which accounts for around a quarter of sales by value. It is followed by Total Effects, Definity
and Complete each with around 10% of sales by value.

P&G standardised the Olay range at the end of the 1990s, dropping most regional name variants, such as Ulay. However it
retains the name Olaz in a handful
of European markets including Germany, France, the Netherlands and Austria. In China it is marketed as Yu Lan.

The brand's most aggressive competitor since the mid-1990s has been Unilever's Dove. Until 1995, Dove was the US's leading soap
brand, and Olay the best-selling moisturizer; but since then both products have launched a series of spin-offs designed to capture
first the middle ground of feminine cleansers, and then a string of other market segments.

For a brand firmly associated with feminine beauty, Olay has a rather surprising history. The product was
actually invented during World War II by South African chemist Graham Gordon Wulff, as a glycerine-based rehydration treatment for
Royal Air Force pilots suffering from severe burn injuries. When the war ended, Wulff began to search around for a new career, and
teamed up with former advertising copywriter Jack Adams Lowe to attempt to sell the cream to consumers. The pair invented the
existence of a mysterious tropical plant which they called the Ulan, from which they claimed their "oil" was derived.
Understanding the marketing power of less-is-more, they decided to say as little as possible about the precise purpose of this Oil
of Ulan. Instead they called it a "mysterious beauty fluid that makes you look younger", and began selling it
door-to-door in South Africa under the auspices of their newly formed company Adams National Industries, based in Durban.

Against the odds, Oil of Ulan began to sell very well indeed, and Adams quickly established a thriving mail order operation,
selling the product to other countries. During the 1950s, the company began exporting to Australia and the UK, followed by North
America and Mexico in the early 1960s. In many cases they adapted the product's branding and packaging to appeal to local tastes.
As a result, Oil of Ulan became Oil of Ulay in the UK and Australia, Oil of Olay in North America, Oil of Olaz or Ulaz in Latin
America and so on.

By 1967, Adams National Group was generating worldwide sales of around $10m, still almost entirely from mail order or
door-to-door sales. That year it was literally stumbled upon by US pharmaceutical group Richardson-Merrell, which had also been
trying to establish a line of female beauty products. One of the company's Australian field sales managers reported that customers
were spurning Richardson-Merrell's products in favour of this mysterious Oil of Ulay brand, and after some months the larger
company tracked down Wulff in Durban and bought him out.

As Oil of Olay, the brand was already doing a small amount of business in the US, but Richardson-Merrell put its own marketing
muscle behind the product to fully establish the brand. At the time, the market for face cream was effectively split between
luxury products such as Estee Lauder at $30 or more and low-cost brands such as Noxzema priced at under $2. Richardson-Merrell
firmly established Olay as a mid-market brand (around $10), and by 1980 had boosted the sector as a whole to sales of around $225m
in the US. Of this Olay carved out a commanding one-third share of the market, growing sales from around $2m in 1967 to more than
$72m in the US, with another $70m in revenues derived from other territories. (At the same time, the company took advantage of a
series of generous government tax breaks by manufacturing the increased supply of the product in Puerto Rico).

Richardson-Merrell sold off its prescription pharmaceuticals business in 1981 and became Richardson-Vicks. Three years later it
was the target of a hostile takeover bid from Anglo-Dutch conglomerate Unilever. The group recruited soap company Procter &
Gamble as a white knight, and was absorbed into P&G in 1985. At the time, the main appeal of Richardson-Vicks to P&G was
the Vicks OTC range, and the group took several years to decide what to do with more marginal brands such as Olay. However a
beauty cream and a lotion for sensitive skin were introduced in 1987, and a cleansing lotion in 1990. Following the expiry of
several of Dove's patents, P&G introduced an Olay beauty bar in 1993, opening up direct competition with the Unilever brand. A
body wash and shower gel was introduced in 1994, quickly notching up sales of around $80m, equivalent to a 27% market share at the
time. Then in 1996, the group unveiled the Oil of Olay Age Defying Series, a collection of skin care products utilizing alpha-hydroxy-based
skincare technology. By the late 1990s, the original Oil of Olay had been spun off into more than 30 separate products under the
shared umbrella brand. Following local customers, in Asia, these include a range of skin whitening beauty products, under the Olay
Fairness brand.

Not all of Olay's brand extensions were successful, however. In the mid-1990s Procter & Gamble announced a concerted move
into the colour cosmetics segment. Olay was by then the world's best-selling facial moisturizer, with a near 27% market share in
the US, supported by a wide portfolio of other products ranging from ageing creams to shower gels. In the new health-conscious age
of the 1990s, it certainly appeared to make sense to combine skincare and colour cosmetics in one product. Another key factor was
the P&G's declining hold on the cosmetics market, as faster-growing rivals Revlon and L'Oreal pushed the group into the #3
position. After two years in development, the group had begun testing a range of cosmetics in Germany in 1994 with some success,
and followed this with a small-scale test in the US, which inevitably attracted the attention of competitors. More tests followed
in the UK in 1996, before the brand was formally launched in Germany again in 1999. P&G claimed success from the European
roll-outs, stating that the range of lipsticks, foundations and eye-shadows had achieved "double-digit market
share".

According to industry estimates, P&G was targeting US sales in the region of $300m from the new brand extension, giving the
group two of the top five cosmetics lines in the United States. (Revlon and Cover Girl were #1 and #2 in 1999 with sales of around
$600m and $550m at retail respectively; sales of $300m would have placed Olay #5 behind Maybelline and L'Oreal). P&G earmarked
a spend of between $60m and $90m just for the cosmetics line, the biggest marketing spend at the time for any single product other
than Gillette's Mach III razor. Yet P&G found the market much harder than it had anticipated, especially following a burst of
rival launches, including a range of Neutrogena cosmetics from Johnson & Johnson, and new products from Revlon's Almay brand.
Although sales of Olay foundation were reportedly good, less obviously skincare-related products, such as eye-shadow, failed to do
well.

Having achieved little more than around 3% share of the US mass cosmetics market and sales estimated at around $88m - less than
a third of target - P&G took the decision to cut its costs and pull the range in the summer of 2001. Many critics pointed
to the product's protracted seven-year conception as another sign of P&G's failure to embrace the fast-turnaround product
cycle it promised in the late 1990s. Initial tests of Olay Cosmetics in 1994 gave competitors a whole five years to develop
spoiler products. By contrast, Olay Facial Wipes, first conceived in 1999, launched quickly and with a greater comparative degree
of success. In their first year these disposable face cloths infused with moisturizers hit sales of over $70m.

In the mean time, the brand had also introduced its first "Age-Defying" products, and these proved far more successful than ordinary colour cosmetics. In 1999, as the original copyrights on the different variations of the Olay/Ulay/Ulaz name began to expire, P&G took the
opportunity to reduce confusion and standardise the product internationally as Oil of Olay in most markets. The "Oil of"
tag was dropped in 2000, after research showed that the target market of younger women were put off by the suggestion that the
product was "oily". At the same time, US sales of Olay hit $500m, taking them ahead of the Dove range in the US. In 2000, the group launched its first push into a premium-priced "masstige" market with the launch of Olay Total Effects. Olay Regenerist followed in 2003.